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New Evidence on Gibrat’s Law for Cities

González-Val, Rafael and Lanaspa, Luis and Sanz, Fernando (2010): New Evidence on Gibrat’s Law for Cities.

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Abstract

The aim of this work is to test empirically the validity of Gibrat’s Law in the growth of cities, using data on the complete distribution of cities (without size restrictions or a truncation point) in three countries (the US, Spain and Italy) for the entire 20th century. For this we use different techniques. First, panel data unit root tests tend to confirm the validity of Gibrat’s Law in the upper tail distribution and, second, we find mixed evidence in favour of Gibrat's Law in the long term (in general, size affects the variance of the growth process but not its mean) when using nonparametric methods that relate the growth rate to city size. Moreover, the lognormal distribution works as a good description of city size distribution across the whole century when no truncation point is considered.

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